Which of the following is true of a foreign exchange market?
a. It is a market in which people or firms use one currency to purchase another currency.
b. It is a market in which people or firms use one good to purchase another good
c. It is a market in which there is only one seller of foreign currencies.
d. It is a market in which only one representative of each country can trade foreign currencies.
a
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Suppose an economy produces only cheese and fish. In 2010, 20 units of cheese are sold at $5 each and 8 units of fish are sold at $50 each. In 2009, the base year, the price of cheese was $10 per unit and the price of fish was $75 per unit. For 2010,
a. nominal GDP is $500, real GDP is $800, and the GDP deflator is 62.5. b. nominal GDP is $500, real GDP is $800, and the GDP deflator is 160. c. nominal GDP is $800, real GDP is $500, and the GDP deflator is 62.5. d. nominal GDP is $800, real GDP is $500, and the GDP deflator is 160.
The interest rate is the opportunity cost of transferring spending power between time periods. However, the market mechanism may fail to provide adequately for future economic growth. List the reasons why a market might fail.
What will be an ideal response?
The use of money for exchange:
A. encourages more specialization in production. B. increases the importance of a coincidence of wants. C. increases the use of barter. D. reduces consumer sovereignty.
The idea that a large national debt is "mortgaging the future of our children and grandchildren" is misleading because:
A. it is the Federal Reserve that will be responsible for making interest payments on the debt. B. future generations will have to bear the opportunity costs of the resources that are used today. C. future generations will not be liable for the interest obligations of the national debt. D. future generations will inherit the interest income as well as the interest obligations.